How Traditional Banks May Get Regulatory Relief

There may be a battle brewing in the U.S. House of Representatives over a bank regulatory relief bill that is wending its way through Congress, but the plan is gathering some steam, with support from various corners.

As American Banker reported on Tuesday (March 1), the plan itself has prime movers in the form of Federal Deposit Insurance Corp. Vice Chairman Thomas Hoenig and, in Congress, has gotten a push from Rep. Ed Perlmutter (D-CO), who debuted legislation last week that would put the FDIC plan into motion. The legislation would provide regulatory relief to “traditional banks,” defined as those that hold no trading assets but operate within the confines of holding interest rate and foreign exchange derivatives positions, with total exposure here at less than $3 billion. They must also, according to American Banker, maintain a “simple leverage ratio” below 10 percent.

Should they meet those thresholds, banks would be exempt from the capital standards that are tied to Basel initiatives and also would not have to run stress testing scenarios. They would instead be eligible for an 18-month examination cycle. The key here, said the publication, is that the focus is on banking activity rather than size, which was a significant area of scrutiny in past years, when banking legislation was formulated.

In a statement tied to the introduction of the legislation, Perlmutter issued a statement, saying: “This legislation will help ease the regulatory burden for the vast majority of banks who engage in traditional banking activities and conduct their activities in a safe and sound manner. Providing targeted relief for our nation’s Main Street banks enables them to focus more resources on lending to small businesses, financing mortgages and promoting economic activity in our communities.”


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